Lefever v. Armstrong

Opinion by

Orlady, J.,

From the facts found by the court below it appears that prior to December 1,1897, P. S. Hovis was the owner of an undivided one-fourth interest in a leasehold estate and in the machinery on the land described in the preecip, the other owners being John S. Campbell, James T. Armstrong and Nelson P. Duncan. On December 1, 1897, Hovis executed and delivered to Henry Lefever, the plaintiff, an assignment of his interest in the lease and machinery as a collateral security for a note of $500, on which Hovis received the money, and which was paid by Le-fever before this suit was brought. This assignment was duly acknowledged and recorded in deed book No. 176, page 221, on December 27, 1897. To effectuate the assignment, a transfer order was prepared by Hovis and Lefever to secure a credit to Lefever of the oil run, from this interest, through the pipe lines of the National Transit Company, but it was so improperly signed by the parties as to be a nullity, and a new one of the same date (December 1,1897) was prepared and signed though not delivered to the pipe line company until December 29, following. The oil received from this interest was credited to Lefever from December 1, 1897, to February 9, 1898. Prior to the transaction with Lefever, Hovis was indebted to O. Y. Cross by his note, dated September 6, 1897, on which a judgment was entered against Hovis on December 22, and a writ of fieri facias issued thereon. That same day it was delivered to the sheriff, who levied upon the interest of Hovis in the leasehold, machinery and appliances, and on February 9, 1898, sold them to James T. Armstrong, a cotenant of Hovis, and gave him a bill of sale therefor. Prior to December 1, Hovis had been the active manager of the business, and up to the time of the sheriff’s sale there had been no change in the manner of conducting it.

When the interest of Hovis was offered for sale by the sheriff, a notice was given that purchasers would buy the interest of Hovis, subject to the rights of the plaintiff in the property and subject to the amount of the note of $500, with interest and costs. Immediately after the sale the pipe line company transferred the credit of oil in its pipes to the defendants, and the plaintiff brought this ejectment to recover the possession of the interest in the lease and machinery. ■ The court below found for the plaintiff, “ the land described in the writ ” to be releaséd upon payment by the defendants to the plaintiff of the amount of the Hovis note less the amount received from the pipe line companj'-, and the defendants'bring this appeal.

The interest of Hovis in the leasehold was interest in land, a chattel real in possession, but none the less a chattel. It was not subject to the lien of a judgment but was subject to levy and sale under a fieri facias: Sterling v. Commonwealth, 2 Grant 162; Titusville Novelty Works’ Appeal, 77 Pa. 103; Duke v. Hague, 107 Pa. 57; Kile v. Giebner, 114 Pa. 381; Brown v. Beecher, 120 Pa. 590; Kinports v. Boynton, 120 Pa. 306.

When the execution on the Cross judgment came to the hands of the sheriff, it became a lien on whatever interest, legal or equitable, Hovis had in the leasehold estate, and the sale by the sheriff conveyed to the purchaser all the title of Hovis as of the time of the levy. No subsequent act of Hovis or of Le-fever could enlarge or diminish' the title as it stood at that time.

The lease from the owner of the fee to Hovis, and the assignment of the one-fourth interest therein by Hovis to Lefever, were recordable instruments under the acts of assembly, and the property described was subject to mortgage: Hilton’s Appeal, 116 Pa. 351. The purpose of the Act of April 27, 1855, P. L. 368, as expressed in the title is “ to amend certain defects of the law for the more just and safe transmission and secure enjoyment of real and personal estate.” The 8th section, which authorized the mortgaging of this leasehold interest, provides that it shall be “ with the same effect as to the lessee’s interest and title as in the case of mortgaging of a freehold interest and title as to lien, notice, evidence and priority of payment.” In which case it was held that the words “ other premises ” embraced a leasehold estate in a city lot for a term of years. The word “premises” as applied to realty, means “lands and tenements,” and there appears to be no good reason why a more restricted meaning should be given to it in the act under consideration. Any other construction would exclude from the operation of the act valuable leaseholds which were no doubt intended to be embraced, and thus fail to effectuate the general purpose expressed in the title of the act and recognized in subsequent legislation on the same subject. But even though unrecorded, the mortgage is good against the mortgagor or a judgment creditor with notice before the debt is contracted: McLaughlin v. Ihmsen, 85 Pa. 364.

In this case the debt of Cross antedated that of Lefever, and it is expressly found by the court below that there was no evidence to show that Cross had notice of the Lefever mortgage at the time he issued his execution against Hovis; nor could Cross possibly have had notice of the leasehold mortgage when his debt was contracted, as at that time the mortgage was not in existence nor its debt contracted.

Under the Act of March 28,1820, 7 Sm. L. 803, no mortgage, except for purchase money, is a lien until recorded or left for record: Foster’s Appeal, 3 Pa. 79; McKerriham’s Appeal, 172 Pa. 234. These recording acts were enacted for the protection of mortgagees, but the protection secured to them by the statutes may be lost through a neglect of their provisions, and after having neglected to place his mortgage on record until December 27, Lefever can claim under it from that date only as against Cross, who had before that time issued his execution without notice of the existence of the mortgage: Adams’s Appeal, 1 P. & W. 447; Nice’s Appeal, 54 Pa. 200; Parke v. Neeley, 90 Pa. 52; McKerriham’s Appeal, supra. Leasehold mortgages are wholly dependent on the recording acts for their validity as liens, and there must be a compliance with their provisions to entitle the mortgagee to displace an execution creditor.

A purchaser of real estate at a sheriff’s sale is protected against all unrecorded conveyances of the defendant in the execution of which he did not have notice. He is bound to look to the possession when the sale is made and to the records, and if neither of these furnish any evidence that the defendant has parted with his interest, he is not required to look further: Stewart v. Freeman, 22 Pa. 120; Davey v. Ruffell, 162 Pa. 443; Hulings v. Guthrie, 4 Pa. 123.

In Uhler v. Hutchinson, 23 Pa. 110, the question was as to whether the holder of an unrecorded mortgage, by giving notice of its existence at a sheriff’s sale upon a judgment, could bind the estate mortgaged in the hands of a purchaser at such sale when the judgment creditor had no notice of the mortgage at the time his judgment was entered; the Supreme Court held that he could not do so. It would be contrary to reason that he should have this advantage over the judgment creditor when he neglected to follow the statutory requirements. “ The law is said to favor the vigilant, but to prefer the unrecorded mortgage creditor, the eleventh hour man would not only be given his penny, but, in order that it may be bestowed upon him, the early laborer is turned away penniless.”

The reasoning in these cases applies with equal force to the one before us. Here, as in cases of real estate, the mortgage becomes a lien on the leasehold estate from the time it is left for record. The lien of the fieri facias attaches when it comes to the hands of a sheriff, and when the fieri facias is issued before the mortgage is left for record, or before possession of the property is taken under it and is legally pursued to a sheriff’s sale, the title to the property passes to the sheriff’s vendee relieved and discharged of the lien of the mortgage even though it is entered before the sheriff’s sale but subsequent to the delivery of the fieri facias. The notice given at the time of the sheriff’s sale was not sufficient to divest the lien of the fieri facias which had attached five days before the mortgage had been recorded. To give it the validity of a mortgage by a subsequent notice would defeat the purposes of the recording acts, which were intended to quiet titles and not to make them uncertain.

The object of recording a mortgage is to give notice to third persons; between the parties thereto a mortgage is just as effectual for all purposes without recording as with it: Jones on Mortgages, see. 467; Bacon v. Northwestern Mut. Life Ins. Co., 131 U. S. 258. The same object requires in sales of personal property that the possession shall be visibly changed at the time of the transfer of title. When the subject of a mortgage is an undivided interest in a leasehold estate, and it is incapable of a manual transfer, the law regards the placing on record of the mortgage as an equivalent and substitute for the change of possession. In this case nothing was done by Lefever to notify any person of his mortgage claim. The ineffectual attempt to secure the oil in the pipe line was postponed until December 27; no notice of any kind was given to any person, nor was an attempt made to place Lefever in the relation of owner of this interest, nor to assert dominion over the propertjr until five days after Cross issued his execution. Le-fever appreciated the necessity of doing something in the way of securing his title to the property, but in following the course marked out by the statute, he delayed long enough to permit another and moi’e vigilant creditor to outstrip him in securing his debt.

The case of Bismark Bldg. & Loan Assn. v. Bolster, 92 Pa. 123, on which the appellee relies, is not in conflict with this one. The opinion in that case stating, “ Whether a mortgage of a leasehold, duly recorded, not accompanied by possession, is good against execution creditors is not a question in this case. Possibly such a mortgage is valid under the act of 1715, the record standing for possession.” The case suggested by Judge Tktjnkev, in that opinion is practically before us. It is not necessary to pass on the right of Lefever in the distribution of the fund arising from the sheriff’s sale. He does not raise that question, and his claim here is for the property as mortgaged by him.

The ninth and eleventh assignments of error are sustained, and the judgment of the court below is reversed, and judgment is now entered in favor of the defendants.